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How To Find A Co-Signer For A Loan – Forbes Advisor

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If you need to borrow money and your financial situation isn’t the strongest, you might be able to boost your odds of approval by seeking out a co-signer. And on the flip side, if you have good credit and a strong income, it’s possible that someone might come to you and ask you to co-sign for their loan.

The truth is that co-signing on a loan can be a win-win for both parties, but it can also result in broken relationships, destroyed credit and financial hardships for the borrower and the co-signer. In order to forge a successful co-signer relationship, you need to know exactly what a co-signer is, how the arrangement works and how to dodge potential pitfalls.

What Is a Co-signer?

A co-signer is a secondary person who agrees to pay back a loan in case the primary borrower defaults (i.e., doesn’t pay it back). When you co-sign on a loan, the loan is recorded on both your credit report and on the main borrower’s credit report. As long as they make on-time payments, you’ll get the benefit of those marks too. However, if the borrower misses a payment or just stops paying on the loan entirely, you’ll be on the hook for the loan. And if you fail to pay up, the lender can actually take you to court for the money.

If you’re looking to borrow money, lenders generally require you to get a co-signer if you have bad credit or no credit, limited income or something else that makes you a lending risk. This is commonly the case for young people who are just starting to build their finances, and who may not have any credit history yet. For example, roughly 90% of all private student loans were made with a co-signer during the 2019/2020 school year according to MeasureOne, a data analytics company.

However, not all lenders accept co-signers, so if you have a limited credit history and think you’ll need help qualifying, it’s best to confirm with the lender before applying.

When a Co-signer Makes Sense

Using a co-signer on your loan can make sense in a lot of cases:

  • You have bad credit
  • You don’t have much income
  • You’re young and you don’t yet have credit in your name

Using a co-signer can help you overcome these barriers so you can get approved for a loan. You may even be able to get lower interest rates if you and your co-signer are approved.

But in order for this setup to work, you’ll need to have a few things in place:

  • Trust between the borrower and the co-signer. The borrower is asking a lot of the co-signer, and so you’ll want to make sure you trust each other.
  • The co-signer needs to have a good credit score. If the co-signer’s credit is the same as yours—or worse—they may not be approved to co-sign on the loan.
  • The co-signer needs to be able to pay the loan on their own. If the borrower defaults on the loan, a co-signer should be able to comfortably afford the payments on their own.

Co-signer vs. Co-borrower

A co-signer is someone who agrees to be a backup for the loan payments. A co-borrower, on the other hand, is someone who’s equally liable for each payment (i.e., before it’s past-due), and who typically also shares ownership rights for whatever the loan was for.

For example, a husband-and-wife team may be co-borrowers on a loan for a house and both listed on the title. This means they own the home equally, and are both responsible for making payments each month.

But if a parent co-signs on their kid’s car loan, they aren’t first in line to make the payments. The lender only contacts them for payment if their kid doesn’t pay up. They also don’t have any ownership rights in the car—even though they’re on the hook to pay for it.

How to Find a Co-signer

Just about anyone can be a co-signer. But since you both need to trust each other, it’s more common to use friends and family with whom you already have an existing and healthy relationship.

If you need a co-signer, make sure you consider who to ask carefully. This is a big ask of them. You’ll need to be open when discussing your financial situation, and they’ll need to be comfortable with disclosing their financial situation, too.

It’s entirely possible that your first choice for co-signer may not be able to comfortably take on the financial responsibilities. If that’s the case, you need to be able to let them off the hook gracefully. Even if they are financially able to co-sign for you, they may not want to take the risk, and you need to be understanding of that.

In fact, it’s entirely possible that you may not have anyone close enough to you who could be a good co-signer. In this case, it may be necessary to consider some popular alternatives to a co-signer arrangement.

Co-signer Alternatives

Not everyone is able to use a co-signer, and that’s OK. But that doesn’t mean you’re out of luck. Here are a few other options to try:

Shopping Around With Other Lenders

The world is full of all types of lenders, some of whom specialize in the types of loan applicants who traditionally need a co-signer. These “bad credit loans” can be a good (if expensive) alternative, but you’ll want to be careful here as there are a lot of shady lenders.

Here are two important things to ask of any bad credit loan lender:

  • What are the rates and fees? Avoid short-term payday loans, which typically charge APRs of 400%, compared to the average two-year personal loan at 9.34% APR.
  • Do you report to the credit bureaus? This will help you build credit, so you don’t need to rely on these types of lenders in the future.

Use Collateral

You might not have a person who can guarantee your loan, but you might have property. Collateral refers to something you own that you agree to give to the lender in case you default on the loan. If a loan has collateral, it’s called a secured loan. Common secured loans include auto loans, mortgages and even some personal loans.

If your lender allows it, you may be able to qualify by agreeing to use something valuable you own as collateral. But remember, if you put up your car as collateral, for example, and fail to pay the loan, your lender can repossess your car.

Ask Friends and Family

If your friends and family are financially stable and willing to lend you the money but prefer not to co-sign on a loan, consider asking them for the money outright. You could ask for it as a gift, or better yet, a loan that you repay back to them.

If you opt for the loan route, make sure you draft up a legal agreement of your own. This reduces the likelihood that your relationship will sour over time if your co-signer feels like they aren’t getting paid back according to schedule. You don’t want to be that family member they’re always hounding for cash.

Go to a Credit Union

Credit unions are often more willing to work with you than banks or other lenders. Of course, it’s not a free-for-all and you will need to meet their loan requirements. But if you’re having a hard time getting approved elsewhere, it might be worth stopping by a credit union in your area to see if they can help.

The downside is that credit unions have their own membership requirements which you’ll need to meet before you apply.

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COVID-19 Infects Financial Stability, But Chronic Low Wages Are The Culprit

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The Federal Reserve found in 2019, 37 percent of adults saying they could not cover a hypothetical expense of $400 with cash, savings, or a credit card, instead, they might turn to Payday lenders who can charge up to 400% interest for a two week loan, according to the Consumer Financial Protection Bureau. What’s their Pay-Day loan collateral? The wages and salary the employer has yet to pay. Workers may have to pay up to 400% interest for access to wages and salaries they earned, but have not yet received.

Remember that sinking feeling when you first started work? You might have even wondered why the employer didn’t pay you first. A bi-weekly paycheck means you work for two weeks before getting paid. For those living paycheck to paycheck, this two weeks can put you behind with bad credit and high interest rates and credit card fees.

Though many gig workers want the benefits, union access and labor rights afforded to regular employees, being paid instantly is a substantial perk to a gig. At least one company, Ceridian
CDAY
a global human capital management technology company – may have a partial solution to the payday loans and liquidity problem of “more month than money.” They seem to be having some success convincing their clients that those who work for them want the option to be paid like day laborers.

The company offers a product which allows employers to pay their employees at the employees’ request before pay day. It is not an advance, but rather payment for work already done. Some employers like it. “When you work in a call center, there are some things that aren’t very flexible. We need employees at their desk, on the phones making calls…” said an official for Crescent Bank (via Ceridian’s public relation’s center). “We can’t offer a ton of flexibility with attendance, [but] we can provide a benefit that other shops are not offering,” he said referring to Ceridian’s product.

Employees might be attracted to employers who offer this option, because faster pay could solve a low liquidity problem. Ceridian commissioned a Harris poll survey of 2,070 U.S. adults ages 18 and older — 1,158 who are employed — for three days starting October 19, 2020. The findings (not posted but sent to me privately upon request) are similar to the Fed’s study, one-third of Americans do not have enough saved to cover monthly groceries. This cash poor situation also creates uncertain futures. The Federal Reserve finds only 37 percent of non-retired adults think their retirement savings are on track, while 44 percent think it is not and 19 percent are unsure.

Older Americans tend to have more savings for monthly groceries. 86% of respondents 65 and older report having the required savings compared to 50% of 18–34 year olds. This may say more about the number of years they’ve had to save than their real stability. Older Americans are not out of the woods.

In an ideal world, a near-lifetime of work would afford every older household a financial buffer to cushion a blow to income or health. Most try to have some savings and reasonably priced credit lines in case of unexpected medical bills or joblessness. But in the not-so-ideal world we live in, millions of older households do not have cash savings or other liquid assets to make up for multiple months of lost income.

As a result, financially fragile older households are more at risk of depleting their retirement savings to make ends meet, as evidenced in the current Covid-19 recession. When these households retire — or are forced into retirement—they will have less retirement income and will face downward mobility in the last years of their lives.

STAGNANT WAGES CAUSE FRAGILITY

Most financial fragility is caused by low pay, not the frequency with which low wages are paid. According to the Economic Policy Institute, wages have stagnating over the last 40 years (disclosure: I sit on the board of EPI). “From the end of World War II through the late 1970s, the U.S. economy generated rapid wage growth that was widely shared,” the institute reports. Since 1979 average wage growth has slowed sharply, with the biggest declines in wage growth at the bottom and the middle.

Low wages and the ensuing financial fragility are the result of eroding unions and worker power. Workers no longer have the political clout they once did. And so over the past 40 years, they have only been able to achieve weak and sporadic increases in the minimum wage. These minimal increases have not been enough to keep up with inflation. The real value of the federal minimum wage (currently at $7.25 per hour) has dropped 17% since 2009 and 31% since 1968 (adjusted for inflation). This amounts to about $6,800 less per year for a full-time worker making the federal minimum wage today than for their counterpart 50 years ago.

It’s unlikely employers using products such as Ceridian’s will be able to solve the financial fragility problems of the U.S. That problem stems from 40 years of stagnating wages and waning worker power. In other words, it’s not an issue of how often, but rather how much employers pay their workers.

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A Look Back At Housing 2020: Relief, Reality, And Rationality

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National Geographic has a series called Seconds From Disaster that, according to it’s website, uses “ Advanced computer graphics, forensic science, eyewitness accounts, interviews with experts, archival footage and re-enactments [to] piece together in great detail the events that led to some of the biggest disasters of modern time.” My last few posts remind me of the series; the housing market in the United States really is seconds from disaster at least figuratively. What can stop this from becoming a disaster of government run and rationed housing? The answer is relief, reality, and rationality.

Relief

It’s simple. When you tell people they can’t go to restaurants and bars those businesses can’t make any money and they lay off employees. When those employees don’t get a paycheck they can’t pay rent. Assuming that this intervention – shutting down the economy – is the right thing to do, wouldn’t it make sense to help the people most impacted by replacing some or all of that lost income?

Instead, what government has done is ban eviction. That makes no sense. If people needed food, you wouldn’t advise the suspension of shoplifting laws so people could help themselves to groceries at the local market, you’d get them cash for groceries or you would distribute them to people in need. As I’ve already pointed out, eviction bans are a time bomb of unpaid rent.

Government can solve this problem by having lenders give fast cash to housing providers who have residents with unpaid rent. It would be a forgivable loan and could be settled up in the months ahead with rent rolls and balance sheets submitted and a promise not to try and collect back rent if a loan is made. The wrong thing to do would be to have government distribute the relief; government isn’t set up to give out money, banks are.

Reality

Marriages, car loans, and businesses arrangements sometimes fail. Courts exist to adjudicate disputes that arise when transactions don’t work out. Eviction is no different. The vast majority of rental relationships between housing providers and their customers work out fine. Sometimes there is friction. Sometimes the housing provider is a bad actor. Sometimes the resident is. Housing providers don’t make money by evicting people any more than a bar makes money by throwing out its customers.

Contrary to the hype, eviction is rare in the United States and when it happens it is very expensive, complicated, and usually resolved without a sheriff putting the contents of a rental unit on the sidewalk. I did an analysis of hyped eviction data from Seattle and the actual removals in one year were vanishingly small, just .7 percent of all rental housing. How many of these 1,200 removals were because of bad actors? How many were the product of lost jobs? We don’t know because that data isn’t tracked. What’s important is eliminating the causes of eviction; especially poverty, mental health issues, and addiction all issues that when combined do lead to serious issues that impact housing. Making eviction more difficult helps eviction defense attorneys not residents short on cash or having complex problems.

Rationality

Maybe it’s not the best or the right term, but most human beings are rational actors in any economy. If prices go up, people find substitutes for products with higher prices. If they can’t find a substitute, they make due and change their lives around to get what they need. At the same time, producers strive to get a product to market that meets consumer demand at a lower price. This isn’t ideology it is how the world works. Price sends important signals to people on how to behave, innovate, challenge the status quo, and propose changes. Price isn’t a bad thing it is our best friend.

When housing prices go up, yes, it is because there isn’t enough. I’ve heard very smart people – much smarter than me – dispute this. “It is much more complicated than that,” they say. Well, it isn’t. It is that simple. Smart people don’t like three piece puzzles or crosswords with simple clues. Why go to Harvard or Yale or start a lab at Princeton if housing problems were so simple I could solve them. It’s this kind of lens through which government and experts survey the “housing crisis.”

Avoiding Disaster

A loftier image I often use is that of the Trojan horse, one that has become a trope for ignoring the obvious. Take people’s income away for a good reason then replace that income. Want to avoid the consequences of poverty – like bad credit, evictions, and housing cost burden – work to eliminate poverty. And if you want people to solve problems creatively, get out of their way; they can usually figure out the solution and if you can help, do it.

The fact that housing is a commodity is not the problem. The housing problem is worsened when government and non-profits decide to get in the way of buyers and sellers of housing with rules intended to protect consumers but instead become a proxy for incumbents who see their equity rise with limited supply. We should not subsidize that self imposed scarcity; instead we should encourage more housing everywhere of all kinds for people of all levels of income.

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Maryland Auto Insurance review 2020

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Formerly known as Maryland Auto Insurance Fund, Maryland Auto Insurance was created by the state of Maryland to keep the state’s drivers on the road legally. They offer a transitional solution to uninsured drivers in Maryland and will not turn anyone away, especially those who have a poor credit history, are high-risk drivers and have been denied coverage from other providers.

To help you decide if they are the right provider for you, we have broken down all the details about the types of insurance it offers, available discounts to help you save and how it differs from other providers in the area.

Maryland Auto Insurance

Maryland Auto Insurance provides a broad range of coverages and discounts to meet most driver’s unique needs.

Types of Coverage

The company’s standard car insurance policies cover the minimum amount of insurance required by Maryland law, including:

  • Liability: The minimum amount of liability coverage required by Maryland Law is $30,000 for bodily injury per person, $60,000 for bodily injury per accident and $15,000 for property damage per accident.
  • Uninsured motorist: The minimum amount of uninsured motorist coverage required by Maryland law is $30,000 for bodily injury per person, $60,000 for bodily injury per accident and $15,000 for property damage.
  • Personal Injury Protection (PIP): Maryland law requires insurers to offer their policyholders at least $2,500 in PIP coverage.

The provider will not deny coverage to anyone, as long as they:

  • Are a Maryland resident
  • Own an automobile registered in Maryland OR have a valid Maryland driver’s license
  • Have been canceled or not renewed by a standard insurer for a reason other than non-payment of premium OR have been refused insurance by two (2) standard insurers
  • Do not owe Maryland Auto any unpaid premium.

It also offers additional coverage options like:

  • Collision
  • Comprehensive
  • Towing
  • Rental Car

Cost of Maryland Auto Insurance Car Insurance

Maryland Auto Insurance determines premiums based on risk level, vehicle type, driving experience, location, amount of coverage needs and several other factors. Consumers can request a personalized quote on their website.

One thing that differentiates this insurance provider from others is that they do not factor in credit history when determining the premium, which can help those with bad credit save money.

On average, Maryland drivers can expect to pay the following depending on their insurance coverage selections:

Minimum Coverage Full Coverage
$1,278 $3,764

Discounts

Because this provider is a transitional option designed for drivers who can’t get insurance elsewhere, there are few discounts available. However, they do offer some ways to save money on an auto policy.

Reasons Why Maryland Auto Insurance is a Great Option

Maryland Auto Insurance is a great provider for those seeking coverage after being denied elsewhere, especially those with bad credit or no credit history.

The company also provides great coverage options for high-risk drivers, including Uber and Lyft drivers, towing and rental cars. However, due to their commitment to covering higher-risk individuals, the cost for coverage can be a bit higher than other providers in the region. Be sure to shop around to determine whether or not Maryland Auto Insurance is the best auto insurance provider for your needs.

Due to Maryland Auto Insurance being a nonstandard transitional provider, all applicants must prove at least two other standard insurers have denied them to qualify, so keep that in mind before requesting a quote.

Maryland Auto Insurance Ratings, Reviews, Customer Satisfaction & Complaints

Because Maryland Auto Insurance is not a standard insurance carrier, information about their financial strength and customer satisfaction is pretty limited. However, there are a few resources customers can refer to when determining the company’s customer satisfaction:

  • Better Business Bureau: The company currently is not accredited by the Better Business Bureau (BBB), nor does it have a BBB rating. However, some interesting insights can be gained from customer complaints. Namely, the company appears to be slow to respond to claims requests, especially when handling claims for people who have been involved in an accident with one of their clients.
  • Google: According to their Google My Business listing, the company has 165 reviews and a 2.3-star rating. Again, most of the complaints are from drivers not insured by Maryland Auto Insurance who have been involved in accidents with one of their insured drivers.

Additional Policies Offered by Maryland Auto Insurance

In addition to regular auto insurance, Maryland Auto Insurance offers policies for Uber and Lyft drivers, motorcyclists and scooters and other low-speed vehicles. It does not offer coverage options for homeowners, renters, life insurance or any other type of insurance product besides motorized vehicles.

Frequently Asked Questions

What is the best auto insurance company?

The best auto insurance company is different for everyone and is largely based on personal preference. It’s a good idea to shop around and compare rates from different carriers, then speak with a licensed insurance professional.

What do I need to get a quote from Maryland Auto Insurance?

Receiving a personalized quote from Maryland Auto Insurance is simple. First, you’ll need to be prepared to prove that you are a Maryland resident, possess a Maryland driver’s license and have at least two previous denials from other carriers. Then you can request a quote online.

How do I file a claim with Maryland Auto Insurance?

Maryland Auto Insurance offers 24/7 claims assistance through their online portal and via telephone. Customers can visit their claims reporting service online to file their claim or dial 800-492-7120 to get assistance.

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